{"id":6226,"date":"2011-04-01T14:51:43","date_gmt":"2011-04-01T22:51:43","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/?p=6226"},"modified":"2011-04-01T14:52:38","modified_gmt":"2011-04-01T22:52:38","slug":"the-north-strip-story-and-salvation-plan","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/the-north-strip-story-and-salvation-plan\/","title":{"rendered":"The North Strip Story and Salvation Plan"},"content":{"rendered":"

Guest blogger Jeff in OKC<\/strong> returns, his previous dispatch on Downtown’s Western Casino<\/strong> having proven a smash hit; its fans included Western manager Anthony Santo<\/strong> himself. During his latest visit, he concentrated upon the north end of the Las Vegas Strip<\/strong>, an area whose (dubious) future has been much in the news of late …<\/em><\/p>\n

\"\"Over at Two Way Hard Three<\/em>, Dr. David G. Schwartz<\/strong> gives an excellent blog post<\/a> about the Riviera<\/strong>‘s revenue decline over the past five years and how it relates to much of the North Strip’s woes. My version of the North Strip consists of the Riviera, Circus Circus<\/strong>, Slots-A-Fun<\/strong>, Las Vegas Hilton<\/strong>, Sahara<\/strong> and Stratosphere<\/strong>, as well as any unfinished or undeveloped sites (Fontainebleau<\/strong> being the most obvious example).<\/p>\n

Although the North Strip casinos<\/strong> have posted losses and stakeholders have also lost some — if not all — of their investments, those losses combined are less than the individual amounts that will not be repaid by South Strip operators MGM Resorts International<\/strong>, Harrah’s\/Caesars Entertainment<\/strong> and former Tropicana Las Vegas<\/strong> owner Coumbia Sussex<\/strong>. The Cosmopolitan of Las Vegas<\/strong> will not repay its development cost to Deutsche Bank<\/strong> of the reported $3.9 billion in the next 25 years, or the true $5.9 billion in 35 years plus. The North Strip operators are just like the rest of Southern Nevada<\/strong>;\u00a0 they borrowed too much money against their home during the boom and can’t pay it back. They would be fine if their debt was at 2000 levels, which is what their property is worth.<\/p>\n

\"\"The other issue the North Strip faces is a lack of leadership during tough times. Virtually all the properties were sold during the boom to people who are not experienced casino operators, or else to corporate investors who don’t have the personal connection. The CEO of Riviera Holdings<\/strong>, William Westerman<\/strong>, had the understanding, but became terminally ill and died last year. The Riviera languished for a couple years while his illness played out and Barry Sternlicht<\/strong> (pictured<\/em>), CEO of the new owner Starwood Capital<\/strong>, bought the Riviera debt and didn’t foreclose until after Westerman died. I don’t know if this was out of respect, but it was intentional.<\/p>\n

The Sahara has been rudderless<\/strong> for 10 years. Owner Bill Bennett<\/strong> died in 2002 after a long illness and his widow had her brother (Al Hummel<\/strong>) run things until they found a buyer. Sam Nazarian<\/strong>, a youthful California<\/strong> developer led an investment group that purchased the Sahara in 2007. They have been either unable or unwilling to reinvest in the property and have scheduled to close it in mid-May. Nazarian’s SBE<\/strong> hotel and nightclub company is geared toward the polar opposite customer base that would be drawn to the Sahara.<\/p>\n

\"\"The Tom Barrack<\/strong>-led Colony Capital<\/strong> investment group bought the Las Vegas Hilton<\/strong> in 2004 as part of a disjointed casino-investing spree that seemed to have them investing in any gaming deal they could get in on and waiting for something to print money.\u00a0 Their loses on Station Casinos<\/strong>, and the Atlantic City Hilton<\/strong> and Resorts Atlantic City<\/strong> (left<\/em>) dwarfed their losses from the Las Vegas Hilton.<\/p>\n

Circus-Circus<\/strong> has largely been ignored since its merger into then-MGM Mirage<\/strong> in 2005 and has been forced to sit helplessly while any possible Capex money is diverted to the monolithic CityCenter<\/strong> development in the center Strip area. The Stratosphere<\/strong> has always been seen as nondescript; floating offshore in the foggy distance.<\/p>\n

T<\/strong>he North Strip has become<\/strong> the consolation prize for owners, all of whom have been pretty blunt that they don’t really want to be where they are but it was the only thing they could buy at the time. Or it was too cheap to pass up. Or they were stuck with it in another deal and haven’t been able to palm it off on someone else. Or “I am marking time with this until I can implode it can become the next Steve Wynn<\/strong>!” Every North Strip owner has their eye — and heart — somewhere else.<\/p>\n

\"\"The North Strip Plan<\/strong>. North Strip operators need to band together and market themselves as a separate area. They may be only a subset but they need to accentuate that theirs is the classic, value-oriented part of the Strip: Vegas like it used to be, without the teeming masses and SoCal twentysomethings crawling out of the clubs. If they don’t have clubs, restaurants and shopping, then sell the positives of better gambling value, and more traditional shows and dining. Advertise in the AARP<\/strong> magazine and target the older market.<\/p>\n

Start a “North Strip Shuttle”: Each casino would operate a shuttle bus under the flag of the North Strip Shuttle; the bus will stop at each North Strip property and in the Center- or South Strip, at one of the MGM Resorts properties. MGM is the logical partner due to its ownership of Circus Circus. This is not going to bring a significant number of people from the South Strip but it will raise awareness of the North Strip and help motivate people who want to visit there.<\/p>\n

\"\"Sahara’s Salvation<\/strong>. I think that Sam Nazarian (left<\/em>) has personal reason why he hasn’t applied for a casino license. I don’t mean a criminal one, just reasons relating to transparency (or governmental intrusion) that he and his partners aren’t will to share. I doubt he will ever be in a position to apply, for those reasons, and might to decide to move from casino-ownership mode back to his core business: hotels, nightclubs and other hospitality components. I also can’t help but wonder how deep his pockets are: His business is so heavily focused in economically challenged areas of Southern California, South Florida<\/strong> and Southern Nevada.<\/p>\n

At some point<\/strong>, your cash needs to flow, which is why I am having trouble believing that Mr. Nazarian and his partners are willing to let the Sahara sit empty for 10 years or more until the market is able to accept any plan for the property. It requires tremendously deep pockets to be able to let a $400 million investment “chill” (incurring property taxes all the while). I see a couple of possible solutions, both of which involve Boyd Gaming<\/strong>. One, Boyd buys the Sahara outright and operates. Boyd is the best choice, frankly, because its older, value-driven customer base is willing to stay in a 1990-quality room. They would probably be OK with tube TVs, so long as they had 27-inch screens. Don’t need any of that iPod<\/strong> and stereo silliness. The Sahara is in better shape than the Tropicana Las Vegas <\/strong>was when the Alex Yemenidjian<\/strong>-led group (Onex Corp<\/strong>.) bought it and could be made over for less money. Boyd has the best fit, customer-base-wise and its lack of a Strip property may be the only sore spot in the company’s operations. There would some bleed-off from the Gold Coast<\/strong> and The Orleans<\/strong> but not crippling or a deal-breaker.<\/p>\n

\"\"My next scenario<\/strong> is more far-fetched but it has positives: Boyd operates the Sahara but does not buy it. Boyd could do any version of a lease, lease-purchase, revenue split, etc. It could give Boyd the Strip presence mentioned before, generate revenue for SBE and have a dual benefit … Boyd could cultivate a Strip customer base ready to move over to Echelon<\/strong> when the economy allows resumption of it — which could be the same time SBE is ready to implode the Sahara and rebuild onsite.<\/p>\n

It’d sure be nice if a deal could be made before May 16.<\/p>\n","protected":false},"excerpt":{"rendered":"

Guest blogger Jeff in OKC returns, his previous dispatch on Downtown’s Western Casino having proven a smash hit; its fans included Western manager Anthony Santo himself. During his latest visit, he concentrated upon the north end of the Las Vegas … Continue reading →<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[48,60,128,3,15,66,28,14,4,59,81,7,11,32,9,100,21,38],"tags":[],"_links":{"self":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/6226"}],"collection":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/comments?post=6226"}],"version-history":[{"count":3,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/6226\/revisions"}],"predecessor-version":[{"id":6234,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/posts\/6226\/revisions\/6234"}],"wp:attachment":[{"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/media?parent=6226"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/categories?post=6226"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lasvegasadvisor.com\/stiffs-and-georges\/wp-json\/wp\/v2\/tags?post=6226"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}